Bhushan promoters in last-ditch effort to halt takeover by Tata Steel

Neeraj Singhal, vice-chairman and managing director of Bhushan Steel, has moved NCLAT intending to ask for a stay from Tata Steel taking over. Photo: Indranil Bhoumik/Mint

Mumbai: Tata Steel Ltd is facing a last-ditch attempt by the promoters of debt-ridden Bhushan Steel Ltd to prevent it from taking control of the company that it won in a bankruptcy auction. This, after fighting off previous hurdles posed by rivals, operational creditors, and Bhushan Steel’s employees.

Bhushan Steel was among the first of the large corporate debtors to be admitted to the insolvency court. But the handover of control of these assets is proving to be harder than many predicted. “We were expecting to move in (to the plant) by the end of this week,” Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said on the sidelines of a Wednesday press conference to discuss the company’s annual results. “Now, the erstwhile promoter has moved the National Company Law Appellate Tribunal (NCLAT) asking for a stay,” he said.

Neeraj Singhal, vice-chairman and managing director of Bhushan Steel, has moved NCLAT intending to ask for a stay from Tata Steel taking over. Mint has learnt he also wants to prevent his equity from being transferred to Tata. The case will be heard on Monday. As of March 2018, the promoter group owned 43.9% of the equity of the publicly-listed Bhushan Steel. Tata Steel’s legal team has filed a caveat, a pre-emptive application urging the court not to pass an order on this appeal without hearing the company.

Tata Steel has previously fended off litigation from Larsen and Toubro Ltd, one of Bhushan’s operational creditors, and from Bhushan’s staff. Dismissing these cases, on Tuesday the National Company Law Tribunal (NCLT) had approved Tata Steel’s takeover of Bhushan. However, several delays has led to corporate governance issues at the plant.

“We’re concerned about what’s the health of the assets and how is it being maintained, what are the commercial transactions happening on the ground, are there appropriate checks and controls on commercial purchase and sales,” said T.V. Narendran, global chief executive officer and managing director, Tata Steel.

“It has now been longer than 270 days (deadline for the insolvency process to complete)—it’s a running plant, there are customers who need to be taken care of, we worry about governance issues. If there is depletion of the asset in any form — whether commercial or physical.. (We want to be sure of that) the transactions that have happened are all kosher or we will have to dig deep when we come in and see what’s right and what’s wrong and take appropriate action on that,” he added.

Tata Steel has offered to pay Rs35,200 crore to bankers for 72.65% of Bhushan Steel’s equity. A recent report by credit rating agency Crisil pegged Bhushan Steel’s flat steel capacity at 5 million tonnes (mt) a year, about 9% of the Indian market. Narendran said Bhushan has a good mix in flat products and is very active in the automotive sector and steel for LPG cylinders. “It’s a good plant and among the assets we looked at in IBC, Bhushan Steel was the best.”

Tata Steel is currently expanding capacity at its Kalinganagar, Odisha, plant. “Completion at Kalinganagar is 3-4 years away, The Bhushan Steel acquisition allows us to ramp up capacity immediately. In the Indian market if we don’t add a million tonnes a year, you can’t hold on to your market share because that’s how demand grows.” Narendran added that Tata Steel would absorb all of Bhushan’s 5,000 employees.

“The IBC process doesn’t allow for a closing due diligence,” Narendran concluded. “We expect that the employees running the plant will take care of the assets. We are obviously tracking things from outside very closely on a daily basis. I hope we won’t have to take to any recourse. We want to move in a manner that is fair and dignified.”